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In this paper, the authors report the findings from an interview survey on the system and process of lending decisions and loan pricing, as well as the information that is used in such processes. The survey targeted 19 regional financial institutions, including regional banks and cooperative institutions in Japan. They found that soft information is used in lending decisions but is rarely used directly in loan pricing, and found that each branch exercises greater discretion in loan pricing. Soft information affects loan pricing indirectly through each bank's internal credit rating process.
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